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How Much Should My Mortgage Cost?

By Adam Pavidis

There is no hard rule for how much you should pay for your mortgage. A normal monthly mortgage payment for any homeowner can vary drastically, from a conservative $1000 per month, to several thousands per month. The reason why there is such a range is because your mortgage is determined by your home's actual purchase price, minus the down payment contributed at closing, divided by the term of your mortgage, which can range between (most commonly) 15 or 30 years.

If you want to apply this to your personal financial situation, it is usually accepted that mortgage payments of 25% of your monthly income will be a very safe bet, with 30% being much more aggressive. This is a standard for most banks/mortgage lenders, who also take into consideration something called your overall "debt-to-income ratio". Debt-to-income ratio is the percentage of your monthly gross income that goes toward paying any debts that you have, such as credit cards, student loans, car payments, as well as your mortgage. Mortgage lenders look for mortgagees whose debt-to-income ratio is less than 36%. So if you are looking for the highest mortgage approval, take care of all your non-mortgage debts before you apply for a mortgage.

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